NEW DELHI -- Indian Prime Minister Narendra Modi's surprise move to withdraw high-denomination rupee notes has delivered a blow, at least temporarily, to most Indian industries. But one conspicuous exception is providers of electronic payment services.
Modi's ban on 500- and 1,000-rupee notes, which account for nearly 90% of the money in circulation in India in value terms, has triggered a massive shift to electronic payments for a wide range of goods and services, from taxi fares to daily necessities.
For mobile internet company One97 Communications, which offers a popular smartphone-based electronic payment service called Paytm, Nov. 8, 2016, opened a new chapter in its history.
In the evening that day, Modi abruptly announced that the 1,000- and 500-rupee notes, worth $14.82 and $7.41, the two most valuable of the commonly used seven bills in circulation, would become worthless at midnight on Nov. 9.
The action was aimed primarily at eliminating illicit funds from the country's economy and politics.
The ban has had one major side effect: a surge in the use of Paytm. The number of daily payments made via the service surpassed 5 million for the first time by Nov. 14, according to a local media report posted on the company's website.
As downloads of the Paytm app soared, the daily transactions reached 7 million in the week after the imposition of the ban.
A wide range of people, from commuters buying a cup of coffee at train and bus stations to farmers purchasing seeds, are flocking to the service, said Sudhanshu Gupta, Paytm's vice president.
E-commerce retailers have been Paytm's main customer group. Now, however, the consumer base is expanding rapidly, with a growing number of street vendors and market fishmongers hoisting the Paytm sign.
More in mind
On the day after the ban on high-value bills was announced, I used the Paytm service for the first time on my way to an interview with Modi. As my rupee notes were unusable, I transferred 2,000 rupees in haste from my bank account to the Paytm app to pay the taxi fare.
During the interview, Modi did not talk much about the matter, although he did say there was no need to worry. In his radio address on Nov. 27, however, Modi pledged to promote electronic payments and online banking to build a cashless society. He then said he would develop a plan for the initiative.
Credit cards and other noncash payment instruments are not widely used in India, where only 3-4% of retailers accept them. The growing popularity of using payment apps via cheap smartphones could eliminate the need for credit cards altogether.
With many people owning cellphones rather than landlines, India has forged a different technology evolution than industrial nations. The country may continue this path with how people make daily purchases.